LatAm debt mostly softer in light volume; Pemex bonds lower; four LatAm deals on the road

By Rebecca Melvin

New York, May 1 – Latin America debt was somewhat softer in light volume on Tuesday as a number of new-deal roadshows were underway and financial markets in Europe and parts of Latin America were closed for the May 1 labor holiday.

Longer-dated paper was bearing the brunt of weakness compared to shorter-dated maturities, a New York-based market source observed.

Petroleos Mexicanos SAB de CV bonds were lower in active trade. The Pemex 5 5/8% notes due 2046 slipped to an 84 handle, trading last at 84.3, down from 85.2 on Monday, according to Trace data. The Pemex 6¾% notes due 2047 were last 95.9, which was down from 96.7 on Monday.

The longer-dated Pemex bonds widened out by about 20 basis points, the market source said, adding that the longer-dated maturities seemed to be playing catch up with the shorter end of the curve, which had already moved.

Petroleo Brasileiro SA bonds were also weaker. “I was noticing some of the oil and gas names. Overall, the market was softer, with sovereigns trading off a bit, but the holiday in most of Latin America took a chunk out of volumes,” the source said.

The weaker trading came on the heels of news that U.S. President Donald Trump has reached agreements for permanent exemptions of steel and aluminum tariffs for Argentina, Australia and Brazil and postponed imposing tariffs on Canada, the European Union and Mexico until June 1.

When the tariffs were announced in March – including a 25% tariff on steel imports and 10% tariff on aluminum imports – Canada, Mexico, Brazil, the EU, Australia and Argentina had been granted temporary exemptions.

Despite trade news, the main driver of the emerging debt capital markets seems to continue to be Treasuries, the source said.

The benchmark 10-year Treasury bond pierced through 3% last week, and while it has since come back some, “we are seeing play out what was expected: bond yields will start to rise,” the market source said.

As Treasury rates move higher, the government bonds become more attractive for investors and reduce demand for emerging market debt.

On the primary side, Telecom Argentina SA’s dollar-denominated notes were being marketed in New York and Boston on Tuesday and roadshowing through Wednesday. Peru’s Camposol SA dollar notes were also roadshowing through Wednesday, while wrapping up on Tuesday were roadshow meetings regarding Paraguay’s Banco Regional SA’s up to $300 million of up to seven-year notes and Petroquimica Comodoro Rivadavia SA’s dollar intermediate-term notes.

In addition, Corporacion Nacional del Cobre de Chile, or Codelco, priced a Formosa bond for $600 million of 30-year senior notes at par to yield 4.85%.

BNP Paribas and HSBC were bookrunners of the Regulation S notes issued in the Taiwan market but denominated in U.S. dollars. The Santiago, Chile-based copper mining company was the latest of a handful of Latin America issuers to price Formosa bonds recently.

“There seems to be a growing appetite for these deals,” a market source noted.

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